USCIS has finally published the final rules on the modernization of the EB5 Program on July 24 2019. These rules were first originally conceived in Jan 2017. It took them almost 2.5 years to finalize the regs. After waiting for congress to enact some much needed changes, which never materialized, USCIS took it upon themselves to push for the regulations concerning investment amounts and TEA guidelines and some other reforms.
Most notably, the Investment amounts have gone up from $500,000 for a TEA project to $900,000 and from $1 million to $1.8 Million for a non TEA project. More importantly, the USCIS has done away with the ability for regional centers to gerrymander TEA regions to their advantage. The new rules require USCIS to assign the TEA regions, as opposed to the current methodology of giving states the benefit to define TEAs. The TEA/rural area definitions have also been changed vastly (an entirely big enough topic for a new post), which basically eliminates most of New York City from the new TEA guidelines.
The change in TEA guidelines has much deeper implications for future investors and current alike. As quite a few of the projects which are in large cities currently with TEA status will not be eligible for TEA status after Nov 21. So basically, investments into these projects have to be made at $1.8 million, not the $900,000 level. This is a huge concern for the viability of an EB5 projects fund raise. For eg., lets say a project currently open for new investors has 40 slots, and if they manage to get 20 investors for $500,000 before the Nov 21st deadline, The remaining 20 investors need to invest a minimum of $1.8 Million as the project doesn’t comply with the new TEA guidelines after Nov 21. This can lead the project not to hit it’s fund raising target jeopardizing the investments of the previous 20 investors also.
If you are looking for a project to invest in right now before the investment amounts go up, ensure that the project qualifies for the new TEA guidelines also. This is vital as new investments after Nov 21st can still be done at $900,000. We at eb5updates.com are seeing some projects that are already gearing up for this new eventuality.
Hopefully, all these changes in the program will reduce fraud and increase transparency in the program.